Social Commerce is Having More Than a Moment
By Stevie Morris • Posted
Social commerce, the latest darling of digital marketers everywhere, continues its meteoric rise in popularity in the U.S. and globally, with the latest predictions putting the new and growing industry at $1.2 trillion dollars in social commerce purchases by 2025.
With more than $958 billion in purchases in 2021 globally, driven largely by millennials and gen z, it’s clear that social commerce represents a very real, potentially extremely profitable tactic for brands to leverage. After all, more than half of the world’s population is now using social media. It’s no wonder brands are hungry to invest.
But with this type of growth—social commerce is said to be growing at 3x the pace of traditional eCommerce—strategic marketers have to ask themselves a few questions.
Like, why now? For something with so much build up—Facebook’s first storefront tech launched back in 2016—is it simply the right tech for the right generation at the right time?
And why is it that the U.S. represents just $36.62 million in social commerce sales, while a market like China has $351 billion? Will doom scrolling for products on our feeds—that we may not have even wanted, but bought anyway—become just the way things are done, or is there more purpose to how we will use social to discover and shop for new products?
Finally, perhaps the most important question—with no real benchmark or standard conversion rate for social commerce—is it worth it?
Social commerce: a moment, or a permanent shift in behavior
There are three things driving the social commerce moment we’re living in:
- Increased time spent on social
The height of the pandemic brought 7.8% more people to social media and a 5% increase in daily time spent, a 69% increase since 2012. Today, there are over 4.55 billion social media users around the world.
- A lot more content.
Content creation and consumption across social channels is exploding. Today, the average daily time spent on social media is now 2.5 hours.
- Growing adoption of digital wallets.
Driven mostly by digital natives (millennials, gen z and even gen alpha), mobile payments are quickly becoming a preferred way to check out. More than two billion people are now using mobile wallets worldwide.
These new behaviors have created different expectations for what people are beginning to expect from brands.
- They prefer convenience when they shop.
Research suggests that 82% of what people like most about social shopping is how quick and easy it is. And 71% of people say they would rather complete a transaction on social after seeing a piece of content, than exit the app to then go to a retail site.
- They like being inspired by new products every day.
Today, 60% of social media users say they’ve discovered a new product through their social feed, while 55% say they have bought a product after seeing it on social.
- They want validation from their community.
How people find new products on social is largely from seeing a creator, influencer, or friend purchase it. For example, 70% of people who regularly watch live streams on social say they were “highly likely” to buy products recommended by the influencer in the video.
With traditional ecommerce, it’s a much more calculated, self-prompted, and multistep process, but with social commerce there’s spontaneity. It allows you to be inspired by a product in the moment, with more impulse and freedom to purchase while never leaving the experience you’re in, so you can move on and continue to scroll through your friends’ posts without thinking twice about the eye cream you just bought for $30.
What social platforms are getting right
Social platforms have adapted to these shifts in behaviors by (smartly) building commerce features directly into the core social platform experience.
Today, Facebook and Instagram both have storefronts where you can shop for products and collections inside of the brand’s profile, along with a half-dozen shoppable content formats that allow you to click on a Story, image, or video and instantly see what product is being featured, its price, and even more product details around it.
TikTok, Pinterest, Snap, and Twitter have all launched their versions of similar social commerce experiences and shops—complete with shop managers for brands and agencies to use to track what’s being bought, by whom, and at what times—with the ability to more flexibly manage product catalogs and swap out products and collections at different times themed with what might be trending that week or day.
As these storefronts become more mainstream and “turned on” by more brands, what will become more interesting is the shoppable content that will drive you toward new products and convince you to buy.
- Live shopping
Several of the big social platforms like Instagram, Twitter, and TikTok have enabled you to shop directly from a live video. Research shows live video is expected to grow 15x by 2022 and reach a 17% share of all internet traffic, so being able to buy what’s in the video you’re watching is a natural progression to this trend and will propel social commerce in 2022 and beyond.
- AR/VR shopping
Some of the social platforms—mainly Instagram and Facebook, and Snap—are enabling the tech via your phones camera lens to actually try a product on or put the product in your space virtually to see if you like it, and then purchase right from within that experience. This is a stepping stone to Web3, as more people join in on metaverse experiences. It’s not clear why just 3% of brands are using these formats across social platforms, but they should be.
- Shopping from creators
Social platforms are capitalizing on the rise of social influencers on their platforms by enabling the ability to shop directly from their profiles and shops. Instagram, for example, has an affiliate program in beta that allows creators to earn commission payments based on the total sales they drive for a brand. YouTube recently announced its BrandCommerce product, also currently in beta, which allows brands to partner with creators on the platform and insert shoppable experiences within the video.
- In-app checkout
It seems all platforms are driving towards enabling the ability to check out directly within the social app, using whatever payment method you have loaded into your digital wallet. On Facebook and Instagram, Checkout allows customers to buy items directly from a shop. Brands do incur a selling fee for the sale—their payment processors handle the transaction and usually issue payouts within 30 days after the brand marks the order as shipped, with the Merchant of Record appears as their payment processors. For now, this is only available in the U.S. but there are plans to quickly scale this to the UK and beyond.
What social commerce hasn’t gotten right (yet)
With all this exciting momentum, there are many brands hesitant to adopt social commerce as an extension of their broader commerce plan. This is likely because there are still multiple pain points associated with executing social commerce experiences across the major social platforms today.
Most of the social platforms have keyword-based search built into the experience, allowing you to look for photos and videos using hashtags and profiles. But today, these search experiences aren’t designed to find specific products to buy from specific brands. That means product discoverability is up to the brand to use paid media and target people with shoppable ad content.
- Data ownership
Unlike a brand’s traditional ecommerce website—where you have access to what your consumers are doing—the data from social commerce experiences is owned by each social platform. Currently, many of the management platforms behind these social commerce features, such as Instagram’s Commerce Manager, are limited in what you can see happening, and the data is not nearly as rich as what you may get from a more advanced commerce tracking partner.
- Product inventory management
Managing multiple stores, across multiple countries, in multiple languages, and on multiple platforms… is a lot. Brands will struggle to manage and optimize product inventory across multiple storefronts, not to mention overcoming technology hurdles of dealing with multiple systems. Having a tool or a single interface to orchestrate your entire social shopping landscape will become a critical need. We are already seeing some social tech companies like Emplifi tackling this issue with its Social Commerce Cloud offering.
- Customer service and support
As quick and easy as social commerce is, you can’t expect for potential buyers to not have any questions about a product before they purchase it. While the social platforms aren’t offering this today, that’s not stopping other businesses from creating AI-powered bots to fill this need by leveraging the platforms DMs.
Perhaps one of the most frustrating things about social commerce today is the lack of any standards. By now, ecommerce and most other digital marketing channels have a standardized conversion rate. While many of the social platforms haven’t hesitated to show case studies from other brands, there hasn’t been any real published data on just how powerful of a selling channel these storefronts are. As more third-party platforms develop deeper analytic tools to enable a more holistic view of product performance across storefronts, these standards will hopefully come to be.
- Selling fees
As checkout becomes more commonplace, social platforms could begin increasing their selling fees. Across the major players, such as Facebook and Instagram, selling fees occur when you use their platforms to sell products and let customers checkout on the platform. Right now, these selling fees can be as high as 5% per shipment. While this is lower than bigger players such as Amazon, there’s nothing to stop these fees from rising further as more people use these features.
What’s next for social commerce
Despite these growing pains, the future of social commerce is bright.
Social platforms will grow to understand more about what consumers want from the social buying experience. In turn, brands will demand more standardization.
Paying for things on social will only get easier—and more flexible—as digital wallets evolve to support alternative methods like crypto and Facebook Pay. With the rise of Web3, Social commerce will be a foundational element of any metaverse experience and could be the tipping point for decentralized commerce, where you can buy anything from wherever you are on the Internet.
Brands not adopting social commerce now, and not at least testing these experiences, will be left behind.
Note: an excerpt of this piece originally ran in Total Retail on May 16th.